Keystone Xl White House

Photo credit: Flickr user tarsandsaction

One more vote. That's all that was needed to get the Keystone XL pipeline project approved in the U.S. Senate and on to President Obama's desk for signature. However, despite the fact that the bill failed that doesn't mean the real deciding vote, the one coming from the pen of President Obama, isn't still forthcoming. According to a report by Reuters this week, it appears he's ready to cut a deal in exchange for Republican cooperation on his domestic agenda.

The vote won't miss next time
While the Senate vote was 59-41 in favor of approving the project, it needed 60 votes to pass the bill and move it to the President's desk for signature. That likely won't be a problem in January when the Senate's makeup is made over as at least eight additional Republican Senators will take office. The Republicans have vowed to take another vote early in the New Year, which puts the pressure on the President to make a decision.

According to the Reuters report, he's willing to issue an executive order to approve the pipeline in exchange for cooperation. What he wants is support for some initiatives that would slow down climate change. He wants new rules to cut carbon emissions from power plants as well as a global agreement on climate change. This would help to offset any additional carbon emissions that came from further development of the oil sands that would be possible once that oil has an easier access to U.S. markets by way of the Keystone XL pipeline.

Obama would also like to see more infrastructure spending as well as the closing of some tax loopholes. However, Republicans have their wish list too, as well as newfound control. They could attach additional legislation to the Keystone XL bill, such as government funding measures, which would make it harder for Obama to threaten a veto.

Relevance and workarounds
That being said, the bigger issue is if the Keystone XL project is as relevant now as it was when it was first proposed six years ago. The company behind the project, TransCanada (NYSE:TRP), has already proposed another project in its own country to move oil out of the oil sands and closer to export markets. The company's Energy East project would move oil to the East Coast where it could then be exported to the U.S. Gulf Coast or Europe by tanker ship.

In addition to that, a growing supply of Canada's oil is being shipped by rail these days. In fact, oil-by-rail shipments are expected to top 700,000 barrels per day by 2016, which is up from 200,000 barrels per day late last year. Incidentally, that's not all that far off from the capacity of the Keystone XL pipeline, which would transport 830,000 barrels of oil per day if it were built. So, it certainly calls into question the necessity of the Keystone XL pipeline.

Oil Sands Tankers

Photo credit: Flickr user Randen Pederson.

Still, the project does have a few benefits over the other two options. First, the Energy East project faces its own obstacles as it could make natural gas more expensive for Canadian cities in the east as that project would repurpose natural gas pipelines and therefore reduce natural gas transportation capacity. Further, shipping the oil by ship to the U.S. Gulf Coast is a more expensive option than directly shipping it via pipeline. Because of that, it cuts even deeper into oil producers' profits given the recent slide in oil prices. To make matters worst, rail is more dangerous than pipelines as it has a higher track record of spills than pipelines. Increased rail traffic has other risks as well, with the U.S. State Department estimating that shipping oil by rail, as opposed to having it shipped on the Keystone XL, will result in 18 to 30 fatalities on railroad tracks per year due to the increased train traffic.

Investor takeaway
There seems to be a growing likelihood that the Keystone XL pipeline will indeed be approved by President Obama next year. While some would say that the project is less relevant now, given the slide in oil prices having a cheaper and safer transportation option than rail will be needed as it will make it less costly to ship oil in North America. In the end, it could help North America improve its energy security at a time when OPEC is seemingly working to take down oil prices in an effort to upend North America's energy revolution. 

Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.